Leasing & Letting Flashcards
What is the aim of RICS Professional Statement: Code for leasing business premises 2020
Mandatory statement which aims to improve the quality and fairness of negotiations, and promotes the use of a comprehensive set of HOTs to make lease drafting more efficient.
What is the structure of the Code for Leasing Business Premises 2020?
Part 1. Introduction
Part 2. Mandatory requirements:
- Negotiations must be approached in a constructive and collaborative manner
- An unrepresented party must be advised on the existence of the code
- HOTs must be marked STC and include the list*
- On renewal, HOTs are subject to reasonable modernisation
- Negotiations should aim to produce letting terms that achieve a fair balance
Part 3: Lease negotiation best practice advice
- Includes advice on deposits, rent reviews, s/c and repairs
Part 4: Appendices
- Model HOTs
- A guide for LL and tenants
*What must be included within Heads of Terms?
Must be marked ‘STC’ and include:
Extent of premises
Special rights
Length of term and 1954 act position
Break / RR
Rent free period
Service charge
Rights to assign etc
Repairing obligations
Use
VAT
What lease terms can affect value?
- Lease length
- Break clauses
- Alienation
- Repairing obligations
- Use clauses
- Rent review mechanics
- Security of tenure (1954 act)
What are the 12 core principles relating to agency?
- Set out in the RICS UK Commercial Estate Agency Professional Statement 2016
o Act in honest and fair manner
o Carry out work with care and diligence and ensure necessary skills
o Ensure terms of business are issued with complaints handling procedure
o Avoid conflicts of interest
o Do not discriminate unfairly in dealings
o Transparent communications
o Client money is held separately and covered by insurance
o Hold appropriate PI
o Identify your client and ensure all parties are clear of obligations to each party
o Give realistic assessments / valuations using professional judgement
o Ensure everything is carried out in accordance with the client’s wishes, having regard to safety and security
Why is appropriate tenant selection important for your client?
- Important relationship between quality of tenant covenant and security if income, thus investment value of property
Talk me through the Estate Agents Act 1979?
Relates to:
- disposal / acquisition of land
- freehold property
- Leasehold property with capital value
Promotes 7 key principles:
1. Clarity re terms of agency
2. Honesty and accuracy
3. Agreement and liability for costs
4. Openness regarding personal interest
5. Absence of discrimination
6. Legal obligation to tell clients about offers received
7. Keep client money seperate
What is Section 18 of the Estate Agents Act?
The requirement to specify all costs and fees in advance, in writing of terms of business
What is Section 21 of the Estate Agents Act?
The requirement to disclose any personal interests or ‘connected people’ i.e someone who could benefit from the transaction such as a relation or business associate
What are the penalties for non-compliance with the Estate Agents Act 1979?
Act is policed by the National Trading Standards Estate and Agency Team (NTSEAT)
and operated by Powys County Council
- Right to be an agent can be taken away
- Prohibition orders
- Warning orders
What is a cooling off period?
A period of up to 14 days where the client can change their mind regarding the instruction of an agent in line with consumer protection regulation
What are the Consumer / Business Protection from Unfair Trading Regulations 2008?
Prevent misleading advertising and not to make any misdescriptions within material or demonstrating unfair practice i.e hiding information, exerting undue pressure
Key facts include:
- regulations apply to all lettings and sales
- agents have a duty of care to client and all parties
- agents must declare all things known re the property (good and bad)
- disclaimers do not apply
What are the penalties for breaching Consumer / Business Protection from Unfair Trading Regulations 2008?
Policed by Trading Standards Office
- Maximum penalty is unlimited fine and/or prohibition order, and up to 2 years imprisonment
- Compensation may have to be paid of up to £25,000
What is the Misrepresentation Act 1967?
- Relates to the misrepresentation or false statement of fact during pre-contractual enquiries, which has the effect of inducing the party to proceed.
- Civil offence and agent can be sued for damages
- Contract can be rescinded
Appropriate disclaimers or exclusions may be effective in protecting the vendor
Is there any case law relating to the Misrepresentation Act 1967?
Yes - Hedley Byrne v Hellier & Partners 1964
- Relates to negligent statements
Case created three tests to decide against an agent’s liability for negligent statements:
1. Foreseeability - is the damage foreseeable?
2. Proximity
3. Fairness
